The need for valuation of goodwill arises at the time of:
(A) Change of profit sharing ratio
(B) Retirement of Partner
(C) Admission of New Partner
(D) Death of a Partner
(E) Dissolution of Firm
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 4
The correct answer is option 4- (A), (B), (C) and (D) only.
Normally, the need for valuation of goodwill arises at the time of sale of a business. But, in the context of a partnership firm it may also arise in the following circumstances:
1. Change in the profit sharing ratio amongst the existing partners;
2. Admission of new partner;
3. Retirement of a partner;
4. Death of a partner
5. Dissolution of a firm involving sale of the business as a going concern.
6. Amalgamation of partnership firms.
* Dissolution of firm does not lead to need for valuation of goodwill.